Celsius customer received $67,000 tax bill for funds lost in crypto lender's bankruptcy, report says

  • A Celsius Network customer was hit with a $67,000 tax bill for funds lost by the bankrupt lender.

  • Doug Stringer had more than $2 million tied up with the lender when it froze withdrawals.

  • Customers remain subject to charges on the high interest income promised by the bankrupt lender.

A Celsius Network customer was hit with a $67,000 tax bill on funds lost in the crypto lender's bankruptcy last year, as tax filings bring up grim memories and new complications for wronged investors.

Bloomberg reported that Doug Stringer, a customer from San Antonio, Texas, had invested more than $2.8 million in Celsius Network prior to its bankruptcy filing last July.

He lost all of his money in the platform when it halted withdrawals last June, a month prior to its Chapter 11 filing.

But because the Inland Revenue Service (IRS) taxes interest earnings through a 1099 form, Stringer and other Celsius investors are finding themselves forced to pay levies on funds that are still hypothetically locked in inaccessible accounts.

"I put all my eggs in one basket," Stringer, whose investment was worth $10 million at one point, told Bloomberg. "And I'm wiped out."

I put all my eggs in one basket. And I'm wiped out.Doug Stringer

The 63-year-old, who works in private equity, said it had put off his retirement plans.

A Ponzi probe into Celsius found the bankrupt lender misled customers on the nature of its business, and used client funds to prop up the value of its native token in a bid to maintain its promise of high-interest returns.

Because of a widespread collapse in crypto valuations last year, investors are unlikely to face capital gains taxes.

But it shines a further spotlight on lending programs offered by crypto companies.

The "staking" program, which promised high-interest returns if investors locked in funds and has faced scrutiny from the SEC, means interest charges have be high.

Roman Smolkin, a 43-year-old software designer, told Bloomberg he was drawn to Celsius by the double-digit yields it promised investors on certain offerings, and piled more than $200,000 into the exchange.

I'm honestly freaking out. It's beyond frustrating — I lost the entire thing that earned the interest to begin with.Roman Smolkin

Now, those high-interest promises have landed him an $8,000 tax bill.

"I'm honestly freaking out," Smolkin told Bloomberg. "It's beyond frustrating — I lost the entire thing that earned the interest to begin with."

The IRS told Bloomberg it was aware of the issue, but decline to comment. A spokesperson for the IRS told Insider that was still the case as of Thursday morning.

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